Business in Bermuda

Bermuda’s pint-size parameters can deceive the uninitiated. It almost defies belief that an Atlantic jurisdiction of just 21 square miles could rank amongst the globe’s top three reinsurance centres, or support a half million jobs worldwide. Yet the island’s diminutive physical scale belies its substantial economic impact — one that is only increasing amid an evolving regulatory landscape and rapid globalisation.Innovation and collaboration are key to Bermuda’s corporate success, and agile teamwork between Bermuda’s industry, government and regulator underscores Bermuda’s status as a top-tier international financial centre. The island’s gross domestic product is on the rise along with jobs growth, and the jurisdiction is witnessing new investment and company incorporations across all sectors.This oldest of British Overseas Territories has long leveraged a combination of unique elements to punch above its weight economically. Bermuda’s location 650 miles off the U.S. east coast positions the island conveniently between North American and European markets, with direct daily flights to key cities. Its regulatory structure is robust and pragmatic.

A Tax-Neutral System

Bermuda’s unique tax-neutral system, designed more than a century ago to support its own infrastructure, does not differentiate between foreign and local enterprises. And unlike many other offshore jurisdictions, it does not qualify as a “tax haven” under official definitions. Instead, Bermuda’s many tax-transparency treaties, beneficial-ownership register, and bricks-and-mortar businesses underscore its blue-chip status as a place to do genuine business. Tax relief is not the primary reason for Bermuda’s attraction to most global companies, however; rather, the island’s world-respected regulation, its compliance with anti-money laundering and anti-terrorism financing standards, its one-stop-shop appeal and the speed to market it offers are the key drivers.Bermuda’s infrastructure is advanced, including excellent telecommunications and a fully electronic stock exchange. A full member of the World Federation of Exchanges and affiliate member of the International Organization of Securities Commissions (IOSCO), the Bermuda Stock Exchange (BSX) is recognised for commercially sensible listing requirements. It represents a leading market for the listing of investment funds, debt and insurance-related securities, and those of small to medium enterprise firms.

World-Class Talent

The island is home to a wealth of world-class talent. Leading (Big Four) accounting firms, along with auditors, financial advisers, lawyers, IT specialists, actuaries, re/insurance underwriters, brokers, fund administrators, corporate secretaries and a full gamut of support services are located within the two-square-mile City of Hamilton. These quality financial intermediaries have a decades-long history of collaboration, which differentiates Bermuda.Established in 1969, the world-respected Bermuda Monetary Authority (BMA) underpins Bermuda’s success as a top financial services centre. Responsible for overseeing all financial enterprises, as well as issuing the island’s currency, the BMA works closely with industry, government and international regulatory bodies to keep its approach responsive and contemporary. Importantly, the BMA’s sophistication as a commercial insurance regulator speeds capital to markets to take on global insurance risk.Responsive legislative updates also keep Bermuda at the forefront of corporate governance. The island’s courts are more than 400 years old — a testament to a rich and trailblazing legal history. Bermuda’s court system can claim the distinctive legacy of having the oldest unbroken British roots outside the British Isles, a legacy grounded in English common law with recourse all the way as London’s Privy Council. More leading global law firms are setting up offices in the jurisdiction in recent years, joining legal powerhouses already established.All these factors have come together to create a unique marketplace. Amid the pastel buildings, balconies and palm-lined sidewalks of Hamilton, global business is being done daily to the tune of billions of dollars. Bermuda’s international business (or, “IB”) sector counts an estimated 3,700 international business employees — including 2,000 (60 percent) Bermudians — who contribute directly to all economic sectors, from retail to transport. More than 60 percent of Bermuda’s vital foreign revenues can be attributed to this IB activity.Bermuda’s economic model also supports close to 500,000 jobs globally, creating and supporting jobs in its onshore trading partners. This includes an estimated 300,000 jobs in the U.S., 30,000 in Canada, and 70,000 in the U.K. through trade, foreign direct investment and portfolio investment capacity — facilitating economic globalisation.

An Insurance Hub

The biggest engine for Bermuda’s own economy is the insurance industry, which traces its roots back to the 1960s, when the world’s first captive (or self-insurance) companies were established. Today, Bermuda is the captive market’s global leader, with 800 companies generating nearly $50 billion in annual gross written premiums. Insuring the risks of Fortune 500 companies, captives are becoming increasingly popular tools for wealth preservation and succession planning for high-net-worth individuals and family offices.The mid-1980s saw the establishment of global commercial insurers and reinsurers, followed in the 1990s and early 2000s by consecutive capital-rich waves of “big cats” — or property-catastrophe specialist firms. These followed high-severity events like Florida’s Hurricane Andrew and 9/11, providing critical capacity to the insurance marketplace and transforming Bermuda as a result. Ranked with New York and London as an insurance hub, Bermuda has the most important property and catastrophe market and is the largest supplier of catastrophe reinsurance to the U.S.; over the past 12 years, Bermuda insurers and reinsurers contributed $35 billion in catastrophe claims payments to U.S. clients; and the island also provides 35 percent of capacity for Lloyd’s of London.What does that mean to onshore communities? It represents a significant role by Bermuda in the rebuilding of cities and communities after the world’s worst disasters. Examples include the fact that Bermuda’s reinsurers paid nearly a third of insured losses from Hurricanes Katrina, Rita and Wilma in 2004–2005; a quarter of Canada’s Fort McMurray, Alberta, wildfires losses in 2016; more than half of New Zealand’s 2010 earthquake liabilities; and a whopping 62 percent of the U.K.’s largest peacetime fire and explosion — the Buncefield oil-terminal fires of 2005. Significantly, Bermuda insurers also make up a quarter of America’s medical liability insurance and reinsurance market.In the past decade, the island’s track record as a catalyst for change in the industry has continued, with the rise of alternative risk financing via “cat” bonds, insurance-linked securities (ILS) and other financial instruments merging insurance with capital markets. Today, Bermuda has the largest depository of ILS listings — almost $20 billion, or three-quarters of global capacity.Bermuda’s stature as an insurance capital was underscored in 2016, when the island became one of just two non-European Union jurisdictions to win full equivalency under Europe’s Solvency II Directive regulating re/insurers. The decision by the European Parliament highlighted its faith in the BMA’s ability to regulate to the highest standards.

More than Insurance

Insurance is not the only industry powering Bermuda’s economy, though. The domicile was one of the first international trust jurisdictions and today is a premier centre for trusts, wealth-management and private-client structures, and family offices. It is also a major asset management centre, with numerous funds, fund managers and fund administration companies represented.Ship owners and ship-management companies also form a key sector, along with a full range of maritime services; and Bermuda’s registry for superyachts, tankers, cruise ships and vessels of all types is renowned as a Class 1 member of the prestigious British Red Ensign Group. The island’s aircraft registry is similarly known since its establishment in 1931 for high safety standards and regulatory oversight.Numerous new industries are also choosing Bermuda as a home jurisdiction, diversifying the island’s economy. Technology startups, bio-med companies, e-commerce entities and nearshore initiatives are attracted by the same advantages that have helped the more traditional industries of insurance and financial services flourish here for decades. Helping attract new industry and support established sectors is the Bermuda Business Development Agency (BDA), a public-private unit established in 2013. The agency acts as a business concierge, proactively targeting investment and connecting new prospects with industry, government and regulatory bodies to make setting up in Bermuda a smooth process.